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TMI Blog1996 (1) TMI 5X X X X Extracts X X X X X X X X Extracts X X X X ..... als are the concerned assessees. They were the appellants in three income-tax appeals before the Income-tax Appellate Tribunal, Hyderabad. The Special Bench thereof disposed of all the three appeals by common order dated February 4, 1993, as they involved consideration of a common question of law relating to the construction of section 115J of the Income-tax Act, 1961 (hereinafter referred to as "Income-tax Act"). This decision of the Special Bench resulted in three writ petitions moved by the Deputy Commissioner of Income-tax, Hyderabad, before the High Court of Andhra Pradesh. The assessee-respondents Nos. 2 in each of these appeals had succeeded before the Special Bench of the Appellate Tribunal on the construction of section 115J of the Income-tax Act. However, Income-tax Reference No. 126 of 1992, which was pending in the High Court also pertained to the very same question centering round the construction of section 115J and was, therefore, clubbed with the aforesaid three writ petitions moved by the Deputy Commissioner of Income-tax against the common order of the Special Bench dated February 4, 1993. All these matters were heard by a Division Bench of the High Court consist ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appellate Tribunal had no jurisdiction to constitute a Special Bench for hearing the appeals of the respondent-assessees. He submitted that the Division Bench of the High Court had misconstrued and misinterpreted the relevant statutory provisions of the Income-tax Act as well as the regulations in this connection. According to Shri Subba Rao, the High Court had wrongly assumed that a Special Bench can be constituted by the President only on the basis of a judicial order and not in exercise of his powers under sub-section (3) of section 255 of the Income-tax Act. According to learned counsel, the High Court had equally erred in taking the view that, on the facts of the present case, the Special Bench was constituted on the whims and fancies of the President and there was no reason for constituting such a Bench. He also further contended that the High Court was equally in error when it held that the Tribunal had committed a breach of the principles of natural justice in not granting an adjournment as asked for by learned counsel for the Revenue, and that on the facts of the present case enough latitude was shown by the Tribunal in adjourning the matters at the instance of learned c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d judgment at page 31 has noted that it was true that the matter was adjourned at the instance of the Departmental Representative from time to time on 11 occasions from October 28, 1992, up to January 4, 1993. However, on January 4, 1993, when the matter was posted for hearing before the Special Bench, Shri H. Srinivasulu, who was appointed as designated officer, to argue the matter before the Special Bench fell sick. It was also not disputed that he was shifted to Hyderabad Nursing Home and the doctors had advised him rest for four weeks. It was also true that Shri Mani, another Deputy Commissioner, who was appointed to assist Shri Srinivasulu, was ready to argue the matter and in fact he argued the matter to the best of his ability. However, in view of the complicated nature of the case and the heavy revenue involved in the matters and also keeping in view the fact that any decision rendered by the Special Bench of the Tribunal will have an all-India effect, to supplement the arguments of Shri Mani, the Department sought permission of the Tribunal to file written submissions and it is not disputed that the Tribunal did not permit the Departmental Representative to file those writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt for getting the matter argued. But for that purpose a short adjournment of a day or two could have been granted when the Departmental Representative who was in charge of the matter was admitted to a nursing home. In any case written submissions could have been taken on record and considered by the Tribunal instead of totally brushing them aside. However, as noted earlier and as ultimately, the Revenue has not suffered till date and its viewpoint has been accepted by the High Court on the construction of section 115J of the Income-tax Act we do not dilate on this question any further. That disposes of the first point. Point No. 2 : So far as this point is concerned, it is necessary to have a look at the relevant facts as emerging on the record of the case which resulted in the constitution of the Special Bench by the President of the Appellate Tribunal. In the counter filed by Shri Kalu Ram Meena, Deputy Commissioner of Income-tax, Hyderabad, in the present proceedings the background facts leading to the formation of the Special Bench by the President have been stated. It is averred that the Tax Bar Association of Andhra Pradesh addressed a letter to the President on July 25, 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der section 115J of the Income-tax Act read with section 205(1), proviso (b), of the Companies Act ? (2) For the purpose of computing the book profits under section 115J of the Income-tax Act read with section 205(1), proviso (b), of the Companies Act whether depreciation includes loss ? (3) If an assessee had not incurred losses in the previous years but only had unabsorbed depreciation claim, the claim for deduction under section 115J(1A)(iv) would not be available to such an assessee ? (4) In a case where there is profit in a year but after adjustment of depreciation it results in a loss, can no adjustment in book profit under section 115J of the Income-tax Act be allowed ? " This reference was made on September 25, 1992, in the prescribed form and it was sent along with a covering letter dated September 25, 1992, to the President of the' Income-tax Appellate Tribunal at Delhi. Thereupon, the President, Income-tax Appellate Tribunal, had accepted the reference and constituted a Special Bench vide letter No. F. 16-LG(ATNZ Sectt) 92, dated October 1, 1992." The aforesaid stand taken in the counter shows that the President appeared to have acted in the light of the reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pecial Bench for resolving the questions involved centering round construction of section 115J of the Income-tax Act in the company of Shri T. V. Rajagopala Rao, Judicial Member, only four listed matters were suggested to be placed before the Special Bench for decision. However, the Special Bench was constituted by the President not for deciding these four matters but for deciding the three tax appeals being I. T. A. Nos. 1845/ Hyd. of 1990, 811/Hyd. of 1992 and 822/Hyd. of 1992, which were moved by the present three assessee-respondents in these proceedings and it is the decision of the Special Bench in these appeals that has resulted in the present proceedings. We wanted, therefore, to know from learned counsel for the appellant as to how the aforesaid three income-tax appeals of the present three respondent-assessees were placed before the Special Bench by the President when the President had agreed to the suggestion of the members, of the Income-tax Appellate Tribunal for placing four other appeals which were listed in the reference of September 25, 1992, for being placed before the Special Bench. In this connection, by our order dated December 1, 1995, the required details wer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ident. He submits further that since there was no judicial order requesting for a reference of any question to a Special Bench, the constitution of the same was not justified. We see considerable force in the submission, since a court or a judicial Tribunal is expected to discharge their judicial functions by passing judicial orders and not by intra-departmental communications. We also see force in the submission of counsel that had the matter been posted for hearing on the judicial side, the Department would have had an opportunity to project its views before the Hyderabad Bench deliberated upon the alleged conflict of authorities, rather than depending on views expressed in articles and journals as reason for constitution of a Special Bench." In our view, the aforesaid decision of the High Court to the effect that the President of the Income-tax Appellate Tribunal cannot constitute a Special Bench save and except under a judicial order cannot be sustained on the scheme of the Act and the relevant regulations. The reasons are obvious. Section 255 of the Income-tax Act deals with the procedure of the Appellate Tribunal. The said section along with relevant sub-sections thereof re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tribunal are obviously administrative functions. They have nothing to do with the exercise of any judicial power. It is, of course, true that as per sub-section (5) the Appellate Tribunal can regulate its own procedure and the procedure of Benches and for that purpose can frame appropriate regulations. In exercise of that power, the Income-tax Appellate Tribunal has framed regulations. The relevant regulation for the present purpose is regulation 98(A). It reads as under : " Regulation 98(A) With a view to bring about uniformity in the procedure for reference of cases to the President, Income-tax Appellate Tribunal for constitution of the Special Benches consisting of three or more members instructions have been issued from time to time. For making such reference the concerned Bench should pass the order similar to order of Tribunal ' the reference shall be made by the Bench as far as possible ' in the pro forma as appended in XIX(B). APPENDIX XIX(B) INCOME-TAX APPELLATE TRIBUNAL Proforma for making reference by a Bench to the President, Income tax Appellate Tribunal for constitution of the Special Bench. ' We the members of..... Bench(es) at......... (Station) are of the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lready seen above that the two learned members had recommended to the President to constitute a Special Bench for resolving the controversy centering round the construction of section 115J of the Income-tax Act by their communication dated September 25, 1992. That was styled as a reference under section 255(3) of the Income-tax Act. It was merely a recommendation for invoking the administrative powers of the President under section 255(3) for constituting a Special Bench. It was certainly not a reference under section 255(3) read with regulation 98(A), We fail to appreciate how the High Court in exercise of its power under section 226 of the Constitution could sit in appeal or judgment over the administrative decision of the President who might have felt that the case was of all-India importance and was required to be decided by a larger Bench of three members. Such an administrative order is not open to scrutiny under article 226 of the Constitution of India except in extraordinary cases wherein the order is shown to be a mala fide one. No such allegation was made by the Department against the President of the Tribunal on the facts of the present case. It may be that the President ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a single member while the Hyderabad Bench decision was by a Division Bench. Still it could not be said that there was no conflict of decisions between the two Benches of the Tribunal. That itself constituted a rational and valid ground for the President to act in exercise of his administrative powers to constitute a Special Bench if he thought it fit to do so. Such an exercise, on the facts of the present case, cannot be styled as an arbitrary or whimsical or fanciful one as wrongly and uncharitably assumed by the Division Bench of the High Court. It is now time for us to deal with one apparent inconsistency underlying the order of the President of the Tribunal, constituting the Special Bench, which was highlighted by learned counsel for respondent-Revenue. As noted earlier, the President of the Tribunal does not seem to have acted suo motu simply relying upon the recommendations of the Income-tax Bar Association, Hyderabad, for constituting a Special Bench for deciding the controversy in issue. He seems to have obtained the opinion of senior members of the Tribunal and in the light of their recommendations contained in the communication dated September 25, 1992, the Special Benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ases in which a common question of construction of section 115J read with section 143(1)(a) of the Income-tax Act was involved were placed before the Special Bench. The cause list of cases posted for hearing before the Special Bench at Hyderabad is annexed as annexure-VI to the affidavit. It shows that the matters pertaining to the present proceedings were placed for hearing before the Special Bench along with four matters which have been mentioned in the reference letter dated September 25, 1992, of the two Members of the Tribunal, namely, Shri T. V. Rajagopala Rao and Shri Chander Singh. It is further clarified in the affidavit that arguments were concluded in all these appeals on January 5, 1993, and judgment was reserved in the four cases to which reference was made. However, at the conclusion of the arguments, learned counsel in those four cases submitted that there were some additional issues which were not specifically covered by the questions which came up for decision before the Special Bench and hence they requested that those appeals be released from the Special Bench, and as the Full Bench felt that it was not necessary for them to go into the other points and once the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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